Monday, April 6, 2015

Equilibrium Access? Decentralization is Needed

After all, decentralization would allow possibilities for alternative equilibrium that would make like easier for some, without being problematic for others. Problems ensue when too many aspects of production and consumption become defined on government based terms. The result is a primary equilibrium which struggles to generate broad access - from a centralized vantage point - for wildly variant incomes and budgets. How do producers and consumers manage to access infrastructure settings which have far too much in common?

Often, they don't. Yet many failed attempts in this regard, appear as though "arbitrary" (i.e. discriminatory) exclusions. Another way this process plays out is through blanket forms of monetary compensation, which - by raising the (single) equilibrium level - continue to undermine the original goal of economic access.

Richard Cornuelle - who I highlighted in yesterday's post - built an organization which proved "tempting" for government - hence ultimately led to an example of the latter process. His efforts to generate a functional independent sector for student loans, were gradually replaced by the entry of government into the same setting. The problem? What once served as a way to target low income students who had the drive and initiative to succeed, was replaced with student loans for everyone. As Cornuelle noted,

The effect of the federal program has been to undermine the confidence of commercial institutions in the credit-worthiness of college students, and they are destroying the very thing they set out to promote.

Considerable incentive exists on government's part, to scale up social program business models to the greatest degree possible. In this instance, educational costs have also increased more, than otherwise would have been the case. Any "blanket approach" of compensation for economic access - as opposed to closely targeted needs - eventually spreads out across the equilibrium as a whole, raising the bar of entry for everyone.

Many circumstance that involve limited access in primary equilibrium, have been viewed as various forms of discrimination - a process which of course includes gender. As universities continue to favor out of state and international students because of higher tuition charges, discrimination could appear as though applicable to most any group imaginable.

How could decentralization help? The biggest concern is a lack of space for economic participation at the level which so many are expected to prepare for. Democracies can become stunted, when people are forced to adhere to the same limited choice sets in one equilibrium. Even if every student were fortunate enough to access the "right" university and make the grade, little else would be different, afterward. Of the universities most likely to survive a higher education shakeout in coming decades, the "survivors" will more closely reflect the actual high income options available after graduation.

Given this unfortunate situation, it would be beneficial to generate new forms of infrastructure patterns that are capable of allowing smaller incomes to accomplish far more than is now the case. Fortunately, the lower costs of digital education will provide a good starting point.

The need for alternative equilibrium solutions is actually a recent development. In mid twentieth century, income levels were more closely aligned, and Washington was able to contribute to infrastructure in ways that provided real gains for all concerned. However, it has become difficult for most centralized governments to provide large scale infrastructure projects. It is all that many municipalities can do just to maintain the existing infrastructure which exists now, and future communities will need to seek out forms of infrastructure which take a different approach for all concerned.

Possibly the main problem for primary equilibrium, has been the pressure to leave most housing costs at a price point which makes it difficult for lower income level households to purchase food without government assistance. This is inexcusable, given the fact that food costs in the U.S. overall are more reasonable than anything else one needs to purchase on a regular basis. Lower income levels should not have housing expenses that are 47% of their income.

However, new communities will need organizational patterns which allow local citizens to invest in both land and building components, so that no one need commit more than a third of their income to housing investment unless they actually want to. Not only would these investment structures provide means for incremental growth, but also a shared community base which makes an alternate equilibrium possible.